Daily Market Update: Sterling falls following new opinion poll
The steady stream of opinion polls in recent weeks has signalled victory for the “Remain” camp in this month’s EU referendum.
Sterling has largely benefited on the back of these. However, it is not all one way traffic as we saw yesterday. Two opinion polls released yesterday afternoon by the Guardian / ICM revealed that public opinion had moved towards the UK leaving the EU in a 52-48 split. GBP/USD is down two cents against the dollar since yesterday’s open ($1.467). Cable is down 1.5% at $1.4460 as I write Meanwhile EUR/GBP has jumped from 75.8p to 77.1p over the same time period. EUR/USD has been a sea of calm amidst the price action with the sterling exchange rates. EUR/USD is unchanged this morning at $1.113.
Yesterday’s incoming US economic data was broadly encouraging. US consumer spending posted its biggest increase in more than six years. Consumer spending accounts for two-thirds of US GDP and the 1.0% m/m rise in April suggests that a strong rebound in economic growth in Q2 remains on track. In turn, this suggests a Fed rate hike next month also looks increasingly likely. Financial markets are pricing in a 61% chance of a rate hike at the July 26-27 meeting. The 1.0% gain, the largest rise since August 2009, was also well above the 0.7% print forecasted by analysts. Meanwhile the Fed’s preferred measure of inflation, the core PCE deflator, came in as expected at 1.6% y/y in April. This compares with the Fed’s target of 2%. While US consumer spending offers encouragement regarding the health of the US economy, concerns over manufacturing continue to mount. The Chicago manufacturing PMI unexpectedly dipped into contraction territory last month. Meanwhile the Dallas Fed’s manufacturing activity index posted its seventeenth consecutive monthly decline in May. We get the country-wide ISM manufacturing survey for the US this afternoon.
The health of global manufacturing is in focus today with the monthly PMIs coming in thick and fast. Overnight, the official Chinese manufacturing PMI held steady at 50.1 for May. Remember with the PMIs 50.0 represents the threshold between expansion (>50) and contraction (<50). However, an independent survey, the Caixin PMI, signalled contraction (49.2) in May and down from 49.4 the previous month. Meanwhile the official non-manufacturing PMI, also released overnight, saw the pace of activity ease to a 3-month low of 53.1. This morning we have already seen Ireland’s manufacturing PMI slip to a 34-month low of 51.5, down from 52.6 in May. This reflects a wider slowdown elsewhere with Spain’s manufacturing PMI (51.8) slipping to a 7-month low. The final Eurozone manufacturing PMI has been confirmed at 51.5 in line with the earlier flash estimate. The UK’s manufacturing PMI is expected to post its second successive month of contraction. Outside of manufacturing, other data releases worth watching include the Bank of England’s latest mortgage approvals and lending data. In the US the Fed will release its latest Beige Book of business conditions.